Specific Instructions

Table of Contents

    Period covered.    File the 2014 return for calendar year 2014, and fiscal years that begin in 2014 and end in 2015. For a fiscal or short tax year return, fill in the tax year space at the top of the form.

      The 2014 Form 1120-H can also be used if (a) the association has a tax year of less than 12 months that begins and ends in 2015 and (b) the 2015 Form 1120-H is not available at the time the association is required to file its return.

      The association must show its 2015 tax year on the 2014 Form 1120-H and take into account any tax law changes that are effective for tax years beginning after December 31, 2014.

    Name and address.   Enter the association's true name (as set forth in the charter or other legal document creating it), address, and EIN on the appropriate lines. Include the suite, room, or other unit number after the street address. If the post office does not deliver mail to the street address and the association has a P.O. box, show the box number instead.

      If the association receives its mail in care of a third party (such as an accountant or an attorney), enter on the street address line “C/O” followed by the third party's name and street address or P.O. box.

      If the association has a foreign address, include the city or town, state or province, country, and foreign postal code. Do not abbreviate the country name. Follow the country's practice for entering the name of the state or province and postal code.

    Employer identification number (EIN).   Enter the association's EIN. If the association does not have an EIN, it must apply for one. An EIN may be applied for:
    • Online—Click on the Employer ID Numbers link at www.irs.gov/businesses. The EIN is issued immediately once the application information is validated.

    • By mailing or faxing Form SS-4, Application for Employer Identification Number.

      If the association has not received its EIN by the time the return is due, enter “Applied for” and the date you applied in the space for the EIN. For more details, see the Instructions for Form SS-4.

    Note.

    Only associations located in the United States or U.S. possessions can use the online process.

    Final return, name change, address change, amended return.   
    • If the association ceases to exist, file Form 1120-H and check the “Final return” box.

    • If the association changed its name since it last filed a return, check the box for “Name change.

    • If the association has changed its address since it last filed a return (including a change to an “in care of” address), check the box for “Address change.

    • To amend a previously filed Form 1120-H, file a corrected Form 1120-H and check the “Amended return” box.

    Note.

    If a change in address occurs after the return is filed, use Form 8822-B, Change of Address or Responsible Party—Business, to notify the IRS of the new address.

    Item A. Type of homeowners association.    See Definitions, earlier.

    Item B. 60% gross income test.   At least 60% of the association's gross income for the tax year must consist of exempt function income. See Exempt function income, earlier.

    Item C. 90% expenditure test.   At least 90% of the association's expenditures for the tax year must consist of expenses to acquire, build, manage, maintain, and care for property, and in the case of a timeshare association, for activities provided to, or on behalf of, members of the timeshare association. Include current and capital expenditures. Use the association's accounting method to figure the total.

      Include:
    1. Salary for an association manager or secretary.

    2. Expenses for gardening, paving, street signs, security guards, and property taxes assessed on association property.

    3. Current operating and capital expenditures for tennis courts, swimming pools, recreation halls, etc.

    4. Replacement costs for common buildings, heating, air conditioning, elevators, etc.

      Do not include expenditures for property that is not association property. Also, do not include investments or transfers of funds held to meet future costs. An example would be transfers to a sinking fund to replace a roof, even if the roof is association property.

    Item D.   Enter the association's total expenditures for the tax year including those expenditures directly related to exempt function income. Use the association's accounting method to figure the entry for item D.

    Item E.   Show any tax-exempt interest received or accrued. Include any exempt-interest dividend received as a shareholder in a mutual fund or other regulated investment company.

    Line 15. Other deductions.    Expenses, depreciation, and similar items must not only qualify as items of deduction, but must also be directly connected with the production of gross income to be deductible in computing the unrelated taxable income.

    Line 20.   Multiply the amount on line 19 (taxable income) by 30% (timeshare associations multiply line 19 by 32%). If the amount on line 19 is zero or less than zero, enter -0- on line 20.

    Line 21. Tax credits.   The association may qualify for the following tax credits:
    • Foreign tax credit (Form 1118).

    • Qualified electric vehicle credit (Form 8834).

    • General business credit (Form 3800).

    Note.

    Homeowners associations cannot claim the investment credit.

      Enter the total applicable credits on line 21 and attach the appropriate form(s).

    Line 22. Total tax.    If the association must recapture any low-income housing credit, qualified electric vehicle credit, or new markets credit, include the amount of the recapture in the total for line 22. To the right of the entry space, write “LIHTC,” “QEV,” or “NMTC,” “recapture,” and the amount. For details, see Form 8611, Recapture of Low-Income Housing Credit; Regulations section 1.30-1 (regarding the qualified electric vehicle credit); or Form 8874, New Markets Credit.

    Line 23g. Total payments.   Add the amounts on lines 23c through 23f and enter the total on line 23g.

    Backup withholding.    If the association had income tax withheld from any payments it received because, for example, it failed to give the payer its correct EIN, include the amount withheld in the total for line 23g. This type of withholding is called backup withholding. Show the amount withheld in the blank space in the right-hand column between lines 22 and 23g, and write “Backup Withholding.

    Line 24. Amount owed.   If you cannot pay the full amount of tax you owe, you can apply for an installment agreement online.

      You can apply for an installment agreement online if:
    • You cannot pay the full amount shown on line 24,

    • The total amount you owe is $25,000 or less, and

    • You can pay the liability in full in 24 months.

      To apply using the Online Payment Agreement Application, go to IRS.gov, click on “Tools,” then click on “Online Payment Agreement.” Under an installment agreement, you can pay what you owe in monthly installments. There are certain conditions you must meet to enter into and maintain an installment agreement, such as paying the liability within 24 months and making all required deposits and timely filing tax returns during the length of the agreement. If your installment agreement is accepted, you will be charged a fee and you will be subject to penalties and interest on the amount of tax not paid by the due date of the return.


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